Revisiting RAC Audits for Home Health Care & Hospice Providers, DMEs

In late 2016, after taking a pause in the Medicare Recovery Audit Contractor (RAC) program, the Centers for Medicare and Medicaid Services (CMS) announced new contract awards for audits to begin in 2017. This included the addition of the RAC for Jurisdiction 5, a national contract to perform audits of durable medical equipment, prosthetic, orthotic and supplies (DMEPOS) claims as well as home health and hospice claims.

Recovery Audit Contractors, which were employed in 2011-2013 after a successful pilot program, were mandated by Congress to review post-payment Medicare claims in order to pinpoint improper payments and extend the longevity of the program Trust Fund. The most recent stats on the results of the RAC program by the CMS are from fiscal year 2015 and indicate the following:

  • Each RAC had an overall accuracy score of 95% or higher.
  • RACs corrected $440.60 million in improper payments, including $359.7 million in overpayments collected from providers and suppliers and $80.96 million in underpayments restored to providers and suppliers.
  • For every dollar spent on the program, Recovery Auditors saved $2.48 for the Medicare Trust Fund.
  • Due to constraints placed on the program, Recovery Auditors were only able to return $141 million to the Medicare Trust Funds, a 91% decrease from 2014.
  • The Prepayment Review Demonstration project, which asked RACs to review claims in eleven selected states before they are paid, prevented over $192.8 million in improper payments. Due to the success of this demonstration, the GAO recommended that CMS seek legal authority for the RACs to conduct prepayment reviews outside of the demonstration.
  • The vast majority (79%) of improper payments collected stemmed from complex reviews of claims.
  • Looking at all of the appeals administrative levels together, only 37.3% of Recovery Audit determinations (Part A, Part B and DME) were overturned on appeal. Among Part A appeals, only 22% of RAC reviewed determinations were overturned.

Under the revised 2017 program, RACs receive a contingency fee of 7-17% based on the payments collected by the CMS. There are nine steps to complete an audit, which you can view here in an infographic provided by the CMS.

Payments are deemed improper based on the following:

  • Payments are made for services that were medically unnecessary or did not meet the Medicare medical necessity criteria.
  • Payments are made for services that are coded improperly (for example, the provider submits a claim for a certain procedure, but the medical record indicates that a different procedure was actually performed).
  • Providers fail to submit documentation to support the services provided when requested or fail to submit enough documentation to support the claim.
  • The provider is paid twice because duplicate claims were submitted.
  • Other errors are made (such as a carrier pays the claim according to an outdated fee schedule).
  • Medicare pays a claim that should have been paid by a different health insurance company.

What’s important to convey to home health care, hospice and DME insureds is the need to establish best practices and standards to remain in compliance in their day-to-day activities. Additionally, providers should be prepared for an audit, which includes:

  • Conducting an internal review of medical records for medical necessity
  • Incorporating a reminder or refresher educational session for all clinicians on documentation
  • Reviewing all recertifications for medical necessity
  • Having the resources and knowledge in order to respond to the RAC timely
  • Implementing processes and resources in place to create appeals for any denial the agency receives

Also critical is making sure your insureds have the right protection in place in the event of an audit. This includes securing Regulatory Audit Insurance Coverage (RAC) as part of comprehensive insurance program. Manchester Specialty Programs provides RAC coverage as part of our Directors & Officers (D&O) Liability insurance, helping to address alleged violations of RAC and providing the ability to cover defense costs, audit fines, and penalties. Our insurance carrier can also provide compliance assistance and audit preparation and response services. In addition, Administrative Defense Coverage is an alternative coverage available as part of our Professional Liability program

To find out more about how we can assist you in helping your insureds obtain the coverage they need for RAC protection, contact us at 855.972.9399.